FERC should reject outright or suspend for the maximum five months the proposed rate hike of CenterPoint Energy-Mississippi River Transmission Co. (MRT), which would "drastically increase" costs for both transportation and storage service on its system and make other tariff changes, said industrial users, municipals, distribution companies and the state of Missouri.

In the rate case, which MRT filed in August, the pipeline proposed an overall annual cost of service of approximately $104 million, which is $47.3 million more than the cost-of-service that was established in MRT's last Section 4 rate case in 2001. Moreover, MRT is "proposing further changes, such as allowing an affiliate [CenterPoint Energy Gas Transmission Co., CEGT] to walk away from maximum rate contracts, and redesigning its rate zones (again, for the benefit of affiliates), that seem clearly designed to penalize captive customers rather than set a just and reasonable rate," U.S. Steel Corp. told the Federal Energy Regulatory Commission (FERC) in its protest [RP 12-955].

"MRT's proposed rates are not just and reasonable and, based on MRT's case in chief, can not be found just and reasonable. As such, this case should simply be dismissed. MRT can refile its rate case when it is prepared to offer rates supportable by fact and testimony," said the steel maker, which receives service from MRT at its facility in Granite City, IL. MRT ships gas from Texas and Louisiana to the Midwest.

In a companion joint capacity release application, MRT is seeking permission to excuse CEGT from its currently effective long-term maximum rate contracts and replace a portion of the contracts with a long-term lease of 330,000 Dth/d of firm field zone capacity at a very low $0.03 Dth rate [CP12-503]. MRT is proposing to credit shippers with just the $0.03/Dth lease payment rather than the approximately $10 million (at the current rate) that CEGT otherwise would be contributing to the system through maximum tariff rate revenues.

"U.S. Steel does not dispute that CEGT's existing contracts may currently be uneconomic. But they remain valid and binding legal obligations of CEGT, and contribute substantially to MRT's fixed-cost recovery. Allowing an affiliate to simply abrogate a contract because it has become uneconomic, and force remaining costs onto non-affiliate shippers, is per se inappropriate," the steel maker said.

MRT contends that the "lease, instead of traditional firm transportation service, is needed to provide the CEGT shippers with seamless pipeline access to Perryville. Furthermore [it] attempts to assuage any concerns about the $0.03 rate by arguing that such a rate is similar to the rate that [firm storage] shippers pay to move gas southbound on MRT into Unionville storage."

As the largest firm transportation and storage shippers on MRT, Laclede Gas Co. called on FERC to reject the rate proposal. "MRT's lease structure smacks of preferential treatment to its affiliate, CEGT. It is extremely unlikely that MRT would make a similar accommodation to a non-affiliate," it said.

"Through these various changes, MRT appears to be moving away from the strong customer focus that it historically has had...Even if MRT can justify everything it proposes -- and Laclede does not believe MRT can -- at a minimum the Commission should require MRT to develop alternative tariff sheets provided for a phase-in of these significant changes, rather than subjecting MRT's customers to massive upheaval overnight," Laclede said. MRT provides gas service to customers in St. Louis, MO, and in southeast Missouri.

The state of Missouri urged the Commission to suspend the proposed rates for the maximum five-month period and to hold a full evidentiary hearing on all elements of the filing.

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